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Rural Telcos: FCC Sec. 706 Authority Covers Retrans Reform

Representatives of rural telecom companies met with top FCC media bureau staffers this week to argue that the ancillary authority the FCC has asserted in taking steps to promote broadband deployment and adoption, and buttress its network neutrality regs, can be used to justify reforming retrans.

Section 706 of the Communications Act gives the FCC the authority to "encourage the deployment of advanced telecommunications to all Americans," a line of authority the FCC has traced to encouraging wireless build-outs (pole attachment reforms, for one), migrating phone subsidies to broadband and codifying its network neutrality guidelines, although FCC Commissioner Robert McDowell has suggested that the invocation of 706 authority as a blanket defense of broadband-related regs is skating on thin legal ice.

In their meeting with Media Bureau Chief Bill Lake and others, the National Telecommunications Cooperative Association, OPASTCO (the Organization for the Promotion and Advancement of Small Telecommunications Companies) the Western Telecom Alliance and CenturyLink, said the commission has the authority under the Cable Act to reform the rules, but also said it had Section 706 authority. They argued that retransmission consent was one of those barriers to broadband investment [the more they have to pay in retrans, the less they have for other things] that the FCC has said 706 gives the commission the broad ancillary authority to redress.

An aide to one of the commissioners said it was the first time they had heard 706 used to argue for retrans reform. A veteran cable attorney seconded that observation, pointing out that, given this FCC's focus on broadband and the chairman's reluctance to get into private negotiations, tying reform to broadband deployment was a "new wrinkle" that made sense.

The FCC currently has an open proceeding proposing some changes to retrans. The commission voted unanimously last March to better clarify what good faith bargaining means. FCC Chairman Julius Genachowski has signaled that the commission's authority is limited by statute to ensuring good faith negotiations.

The proposed rulemaking issues from the start point that the FCC does not have the authority to mandate carriage or arbitration. But it does suggest a number of possible changes, specifically to "provide more guidance to the negotiating parties on good-faith negotiation requirements; improve notice to consumers in advance of possible service disruptions caused by impasses in retransmission consent negotiations."

The commission also suggested it could waive rules that prevent cable operators from negotiating with nearby similarly-situated TV stations if they could not strike carriage deals with their in-market affiliate.

Cable operators have argued that retrans is a consumer-unfriendly regime skewed in favor of broadcasters and that the commission has the authority to mandate standstill agreements or arbitration in cases of impasses. The rulemaking came in response to a petition by cable operators including Time Warner Cable and those represented by the American Cable Association, which have argued it is time for Extreme Makeover: The FCC Edition.